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Principles of Engineering Economic Analysis, 5th Edition

Summary

This unified examination of economic analysis principles from a cash flow viewpoint, provides a systematic, 7-step approach for performing a comparison of investment alternatives. It offers comprehensive coverage of cost concepts, inflation, ACRS and modern methods of depreciation, income taxes, economic analysis. It features more current economy examples, a new chapter on reality issues, and new material on non-manufacturing examples.

Table of Contents

Chapter 1 Introduction

1

(29)

1.1 Background

1

(1)

1.2 The Problem Solving Process

1

(6)

1.3 Nonmonetary Considerations

7

(4)

1.4 Present Economy Examples

11

(12)

1.5 Overview of the Text

23

(7)

Chapter 2 Time Value of Money Operations

30

(53)

2.1 Introduction

30

(5)

2.2 Cash Flow Diagrams

35

(1)

2.3 Interest Calculations

36

(2)

2.4 Single Sums of Money

38

(2)

2.5 Series of Cash Flows

40

(15)

2.6 Multiple Compounding Periods in a Year

55

(4)

2.7 Continuous Compounding

59

(6)

2.8 Equivalence and Indifference

65

(5)

2.9 Introduction to Measures of Worth

70

(1)

2.10 Summary

71

(12)

Chapter 3 Reality Issues and Practical Applications

83

(25)

3.1 Introduction

83

(1)

3.2 Changing Interest Rates

84

(2)

3.3 Consideration of Inflation

86

(7)

3.4 Principal Amount and Interest Amount in Loan Payments

93

(4)

3.5 Bond Problems

97

(6)

3.6 Special and Limiting Cases of Time Value of Money Factors

103

(1)

3.7 Summary

104

(4)

Chapter 4 Measuring the Worth of Investments

108

(35)

4.1 Introduction

108

(1)

4.2 Methods of Measuring Investment Worth

109

(18)

4.3 Capital Recovery Formula

127

(1)

4.4 Using Spreadsheets to Measure Investment Worth

128

(6)

4.5 Summary

134

(9)

Chapter 5 Comparison of Alternatives

143

(113)

5.1 Introduction

143

(2)

5.2 Defining Investment Alternatives

145

(4)

5.3 Defining the Planning Horizon

149

(6)

5.4 Developing Cash Flow Profiles

155

(3)

5.5 Specifying the MARR

158

(8)

5.6 Comparing the Investment Alternatives

166

(11)

5.7 Performing Supplementary Analyses

177

(26)

5.8 Selecting the Preferred Alternative

203

(6)

5.9 Analyzing Alternatives with No Positive Cash Flows

209

(1)

5.10 More on Dealing with Unequal Lives

210

(3)

5.11 Replacement Analysis

213

(11)

5.12 Summary

224

(32)

Chapter 6 Income Taxes and Depreciation

256

(63)

6.1 Introduction

256

(1)

6.2 Tax Concepts

257

(1)

6.3 Corporate Income Tax--Ordinary Income

257

(2)

6.4 After-Tax Cash Flow

259

(3)

6.5 The Meaning of Depreciation

262

(1)

6.6 Some Definitions Used in Depreciation Accounting

263

(1)

6.7 Traditional (pre-1981) Depreciation Methods Based on Years

264

(4)

6.8 Modified Accelerated Cost Recovery System (MACRS)

268

(10)

6.9 Accelerated Cost Recovery System (ACRS)

278

(1)

6.10 Comparison of Depreciation Methods

279

(2)

6.11 Other Depreciation Methods Not Based on Years

281

(1)

6.12 Effect of Depreciation Method and Recovery Period

282

(5)

6.13 Effect of Interest on Borrowed Money

287

(4)

6.14 Capital Gains, Losses, and Tax Treatment

291

(2)

6.15 Disposition of Depreciable Property

293

(4)

6.16 Investment Tax Credit

297

(1)

6.17 Section 179 Expense Deduction

297

(2)

6.18 Carry-Back and Carry-Forward Rules

299

(1)

6.19 After-Tax Analysis Under Inflation

299

(5)

6.20 Depletion

304

(1)

6.21 International Considerations

305

(2)

6.22 Summary

307

(12)

Chapter 7 Economic Analysis of Projects in the Public and Regulated Sectors